KNM

 

Before 2008, this was a company in the O&G sector with fast growth.  It was growing very fast due to frequent acquisition.  The market players gave it a high PE.  Then it swallowed Borsig.  This was a very large company and KNM financed this acquisition with a lot of debt.

When 2008 came, its business declined.  Its business shrunk and EPS dropped.  Together with contraction of its PE, its share price dropped quickly.  It dropped from RM 2.13 per share at the end of  2010 to RM 0.42 at end of 2012.  Its huge debt became a big burden.

Its business has not recovered since.

Recent moves by other significant shareholders are interesting.

The lesson here is to recognise that not all growth is good.  Growth maybe good increasing the intrinsic value of the company.  Growth can also be bad, destroying the intrinsic value of the company.  Growing its existing business organically is generally safer than growth engineered through acquisition.  Acquiring another has its associated risks.